What happens when the support stops?
Have you accessed government support for your business? If so, you’ve probably got one eye on the clock as it ticks down to the end of September. What will the outlook be for your business then?
Maybe you’re one of the thousands of business owners of smaller SMEs who chose not to take advantage of all the financial and business support options available to you. Is that still the best decision for your business?
The government has announced that the UK economy is officially opening up again, with most restrictions put in place to tackle the global coronavirus pandemic being lifted.
Regardless of how you feel about it on a personal level, this move comes as a huge relief for vast numbers of business owners whose trading has been hit hard by the Covid-19 crisis. Quite understandably, they now want to hit the ground running. Perhaps you’re one of them.
The flipside is that a great many of these companies will have applied for government-funded support to keep them ticking over during the past 15 months – and they’ll have been very grateful for it. However, the ending of restrictions also means the ending of support. So the uncertainty continues…
How will autumn feel for you and your team?
In this period of flux – with government support changing and reducing every month – it’s critically important to check in with your business and ensure you have a solid understanding of the outlook.
It’s all too easy to switch off a bit over summer. But as an SME owner, you should be spending some time getting a feel for autumn and beyond. Because right now, you need to know what your real underlying business is doing. Where is it heading? What does your real cost base look like, without the support? Do you need to be making any decisions now, so you can take appropriate action before the end of September, when the support stops?
Furlough support via the Coronavirus Job Retention Scheme (CJRS) ends in September. But the government’s Recovery Loan Scheme remains open until 31 December 2021.
So now’s the time to establish whether or not you need to borrow any money – while that loan avenue is still open to you. Even if you feel you don’t really need it, it might be sensible to think about borrowing a sum anyway, simply because the interest rates are so low. You could borrow the money to fund your growth, even if you don’t technically need it to survive!
Explore all your options. Is there any other government support that could potentially benefit your business? Take two minutes to check using this easy tool on the Gov.uk website. Just answer some quick questions and it will display all the current business and financial support available to you.
If your business has used the furlough scheme, you’ll no doubt be fully aware of the now-reducing level of support it offers. The government funding of employees’ salaries dropped from 80% to 70% in July. This reduces further to 60% in August, 50% in September – and then it drops off the cliff and stops entirely from October onwards. What does that mean for your business? Do you really know?
It’s only natural to shy away from potentially scary scenarios. But if you’ve accessed this support to prop up your business over the past 15 months, you need to dig deep into your numbers – and fast.
Make sure you get the management information you need
The importance of monthly management information cannot be underestimated. If you don’t have that key information to hand, how do you know where you are now – and what the future looks like?
Meaningful management information isn’t something you can glean from a quick glance at the dashboard of whatever cloud accounting system you use. It takes skill to compile – and goes far deeper than that. There, of course, are lots of factors you’ll need to consider. But at the very least, you need to know not only how profitable your business is every month now, but also what cashflow is going to look like come September. And what about in October, when there’s no support at all?
Quite often, there can understandably be some personal nervousness about interrogating your numbers like this – and that seems to be the case especially among business owners of smaller SMEs. Maybe you don’t really want to acknowledge the starkness of a particular situation, or you’re reticent about the idea of borrowing money and exposing yourself to that kind of risk. Fair enough (and we’ve all been there at some point in our entrepreneurial lives).
If you feel this way, spin it around and look at it from the positive perspective: those business owners who make sure they get and understand the monthly management information they really need are the ones who sleep better at night – simply because they know what all their options are. They can see what’s coming and plan accordingly. The value of that? Priceless.
What will your business look like in 3 or 6 months?
It’s time to do some serious thinking. So here are 3 key things to consider over the next fortnight…
- Your cost base.
- Your cashflow.
- Your business set-up.
Each of these considerations will help you get a better feel for where your business is heading – and the decisions you may need to make.
Start by taking time to reassess your cost base. Do you need to be spending what you are? Is there anything you can trim from your ongoing expenditure? Working life has changed (and continues to change) for all of us. With so many more people now more used to working from home, do you really need all the office space you have? Could you perhaps share an office with another business?
Make sure that you have a really good updating cashflow forecast – for 3 months, 6 months and beyond. This is something that you need to have to hand every month (potentially every week) as the wider business landscape continues to shift and we all start to move forward. So make sure your day-to-day accounting data feeds into it and that it automatically updates to show real business performance.
If you’ve accessed furlough support, having an accurate cashflow forecast is something you need to sort out right now. It’s business-critical for you to be able to understand what the next 3 months looks like – do not wait until September to start thinking about how you’re going to make payroll in October.
Finally (for now!), give considered thought to the way you run your business. The market is shifting in terms of how organisations of all sizes choose to access the resources they need to be successful. So what expertise do you need in your business – and how will you secure that?
At YRH, we’ve experienced a significant increase in the number of clients wanting to talk to us about insourcing over the past year – and for good reason. SME business owners are recognising that they can (quite rightly) challenge the old resourcing models. That they don’t need to carry the cost of employing a full-time finance team when they can simply access the talent and best practice they need on a part-time basis. That they can dump the overhead while benefiting from more experienced people, who will help them implement a back-office function that looks more like a profit centre than a cost centre.
That’s obviously great for our business. But it could prove to be the winning mentality for yours, too.
For an informal chat and to find out more about how we can help you access the meaningful management information you need for your business contact us today.